But I sometimes wonder whether I make any progress with these arguments. Maybe I’m being too much of a wonk? Perhaps I need an example that strikes a chord with regular people.

I don’t know if that’s true, but let’s give it a try. I now have an example of the Laffer Curve for the MTV audience. Best of all, the story is from USA Today.

The IRS got red-faced trying to collect the new tanning tax, burning a hole in estimates on how much the levy would bring in to federal coffers, a new report said Thursday. …Tanning tax receipts for that nine-month period totaled $54.4 million, the report found. That was below projections by the Congressional Joint Committee on Taxation, which had estimated the tax would raise $50 million in the last three months of fiscal year 2010 and $200 million for the full 2011 fiscal year.

Let’s deconstruct the numbers from the article. The Joint Committee on Taxation estimated that this new “Snooki” tax (part of the awful Obamacare legislation) was going to raise about $50 million every three months.

Yet during the first nine months, the tax raised just $54.4 million, not $150 million.

To be fair, some of this huge revenue shortfall may be a result of short-run factors associated with levying a new tax, but does anyone think the actual revenues will match the JCT’s estimates at any point in the future? If you think that will happen, get in touch with me so we can make a friendly wager.

Why am I willing to put my money where my mouth is? Simple, the government’s revenue estimators have been consistently wrong for decades because they use models that assume tax policy has no impact on economic performance.

14 Responses

Of course it’s Snooki 1, IRS 0
It’s really unfair to blame the IRS for misjudging, they’re in a field where they don’t have to meet any standard–they get paid no matter how badly they do and the courts are set up to treat their word as gospel even if everything they say is a lie, no incentive whatsoever to do a good job. Snooki on the other hand actually has to provide a service (in this case something that arguably passes for entertainment, or at least something that brings in ad revenue) or she will not get paid. Of course she understand economics better, she actually has to work (or the semblance thereof) to get paid…the IRS just has to steal.

[…] And if higher tax rates are sufficiently onerous, the resulting reductions in taxable income can completely offset the revenue-generating impact of higher tax rates. Indeed, this is what’s already happened with the “Snooki tax.” […]

[…] And if higher tax rates are sufficiently onerous, the resulting reductions in taxable income can completely offset the revenue-generating impact of higher tax rates. Indeed, this is what’s already happened with the “Snooki tax.” […]

[…] can completely offset the revenue-generating impact of higher tax rates. Indeed, this is what’s already happened with the “Snooki tax.” And the same thing happens in reverse. If lower tax rates lead to a big enough increase in taxable […]

[…] can completely offset the revenue-generating impact of higher tax rates. Indeed, this is what’s already happened with the “Snooki tax.” And the same thing happens in reverse. If lower tax rates lead to a big enough increase in taxable […]

[…] can completely offset the revenue-generating impact of higher tax rates. Indeed, this is what’s already happened with the “Snooki tax.” And the same thing happens in reverse. If lower tax rates lead to a big enough increase in taxable […]

[…] read (here and here) about the Laffer Curve disrupting the plans of French politicians. Heck, even Snooki has teamed up with the Laffer Curve to deny our greedy overlords in Washington. Rate this:Share […]

[…] And if higher tax rates are sufficiently onerous, the resulting reductions in taxable income can completely offset the revenue-generating impact of higher tax rates. Indeed, this is what’s already happened with the “Snooki tax.” […]

[…] Curve, there are some impressive examples of failed tax increases in countries such as the United States, France, and the United Kingdom. But if there was a prize for the people who most vociferously […]

[…] And if higher tax rates are sufficiently onerous, the resulting reductions in taxable income can completely offset the revenue-generating impact of higher tax rates. Indeed, this is what’s already happened with the “Snooki tax.” […]